Our study helped us to identify three key dimensions of sustainability-focused real estate investment that enable us to compare different regions and their progress towards greener portfolios.
These three dimensions are strategy, appetite, and level of investment:
- Strategy: addresses existing strategies, commitments and approaches to sustainability, both now and in the future
- Appetite: relates to, amongst other factors, willingness to stop investing in unsustainable buildings and willingness to pay a premium for sustainable buildings.
- Level of investment: concerns existing and future makeup of property investment portfolios, including the proportion at risk due to failure to meet certain sustainability criteria
Our scoring system was built by clustering together certain questions from our opinion research study and assigning scores to those questions. We then calculated the scores of the investors in our sample along each dimension and overall and compared them on regional levels to generate benchmarks.
Explore the regional differences in the interactive diagram below. Select a region to see how they compare to each other.
Investors believe that a sizeable proportion of their current real estate portfolio meets sustainability standards, but their strategies (i.e. measurable goals, dedicated teams, agreed definitions etc.) are somewhat lagging. As a result, their drive to increase their proportion of sustainable properties is also slightly behind.
Investors believe that a sizeable proportion of their current real estate portfolio meets sustainability standards, but their strategies (i.e. measurable goals, dedicated teams, agreed definitions etc.) are somewhat lagging. As a result, their drive to increase their proportion of sustainable properties is also slightly behind.
On average, European investors estimate that 35% of their real estate portfolio currently meets high sustainability standards, compared to 41% amongst US investors.
US investors have the highest proportion of properties that meet high sustainability standards: 41% now, compared to just 35% for European investors. They expect this to reach 47% by 2030 (compared to 44% for European investors).
Comparing the scores on a regional level shows that US and Asian investors are currently ahead across our dimensions of sustainable real estate, while European investors are lagging notably behind.
Investors believe that a sizeable proportion of their current real estate portfolio meets sustainability standards, but their strategies (i.e. measurable goals, dedicated teams, agreed definitions etc.) are somewhat lagging. As a result, their drive to increase their proportion of sustainable properties is also slightly behind.
Investors believe that a sizeable proportion of their current real estate portfolio meets sustainability standards, but their strategies (i.e. measurable goals, dedicated teams, agreed definitions etc.) are somewhat lagging. As a result, their drive to increase their proportion of sustainable properties is also slightly behind.
On average, European investors estimate that 35% of their real estate portfolio currently meets high sustainability standards, compared to 41% amongst US investors.
US investors have the highest proportion of properties that meet high sustainability standards: 41% now, compared to just 35% for European investors. They expect this to reach 47% by 2030 (compared to 44% for European investors).
Comparing the scores on a regional level shows that US and Asian investors are currently ahead across our dimensions of sustainable real estate, while European investors are lagging notably behind.
Download the full report
Market spotlights
Asia
Hong Kong has led the way in prioritizing green initiatives and proptech innovations, but the rest of the region is yet to follow. This is partially due to the lack of consistent sustainability building standards across the continent. More developed markets such as Hong Kong and Singapore, as well as other business and manufacturing hubs across the region, have green building standards in place. However, other areas are still in the process of developing recognized standards.
Our study reveals that Asian firms* are particularly concerned about accusations of greenwashing: 82% of Asian firms say that the risk of being accused of greenwashing is a barrier to real progress in their investment strategy around sustainable buildings, compared to an average of 66% across all markets. The lack of consistent standards could be driving this concern.
* Respondents were based in China, Hong Kong and Singapore
Europe
The Energy Performance of Building Directive (EPBD) – the main piece of EU legislation addressing decarbonization of buildings – is currently under revision, with the recast negotiations approaching their conclusion. Buildings are currently responsible for over a third of EU emissions and 40% of energy consumption. Currently, 75% of Europe’s buildings are classed as inefficient and will need to be upgraded by 2050 if the EU is to meet its net zero targets.
Our study shows that although Europe is setting precedents in terms of sustainability legislation, European investors’ attitudes do not necessarily match. Although European firms in our study (based in the UK, France and Germany) are more likely than firms from any other region to say they have a public commitment to sustainability, they are the least likely to say they are actually factoring sustainability into their day-to-day decision-making: 68% of European investors say that sustainability performance is an important factor to their firm when making real estate investment decisions, compared to 84% of US investors and 83% of firms based in the Middle East.
Markets now need to find a way to reach the ambitious goals that have been set.
Dr. Thomas Prüm, Real Estate Finance (Frankfurt) at BCLP
Middle East
Due to the global rise in oil prices, and the resulting economic growth, the Middle East is seeing continued investment in real estate and increased activity from occupiers and investors in the market. In 2010, the United Arab Emirates announced the implementation of green building standards throughout the country, while Saudi Arabia introduced a green building rating system called Mostadam in 2019.
Our research finds that over half of investment firms based in the Middle East* have a public commitment to sustainability and over four in five (83%) are prioritizing sustainability performance when making real estate investment decisions.
*Respondents were from the UAE and Saudi Arabia.
United Kingdom
United States
The EU tends to be seen as a trailblazer in terms of sustainability regulation, while political and media narratives regarding the sustainability agenda in the US often suggest that it is behind the curve. However, our study indicates that US-based investment firms are generally ahead of their European counterparts in terms of their sustainable real estate attitudes and appetite. Over eight in 10 US investors (84%) say that sustainability performance is an important factor to their firm when making real estate investment decisions, compared to just 68% of European investors. And on average, US investors say that 41% of their current real estate portfolio meets high sustainability standards, compared to an average of 35% of European investment firms’ portfolios.
The sustainable real estate landscape in the US can be complex, with regulations and approaches differing at a state level. This can be seen as an advantage, as this allows states and regions to manage their individual legislation to local environmental needs. As well as this, local US laws have required benchmarking, that oblige utilities to share whole-building data. Accessing this level of building data has been a weak spot in Europe due to data privacy legislation.
BCLP in Practice
With the world’s 4th largest real estate legal team, BCLP brings enduring value to client relationships by combining experience, industry knowledge and market connections.
Our team of over 700 real estate sector lawyers across 31 offices in North America, Europe, the Middle East and Asia has a track record that speaks for itself, working together seamlessly to navigate our clients through the full life cycle of their real estate projects.
As industry leaders, we play close attention to the market trends and key indicators that affect our clients, their investments and returns, providing us with a comprehensive understanding of the issues that can impact a real estate transaction. This includes the sustainability imperative facing the real estate sector, and we are advising clients on ways to tackle this sustainability challenge, including green leasing, green financing, funding regulation and PropTech.
From single asset transactions to portfolio deals, from ground-up development projects to long-term ground leases, and from joint ventures to company acquisitions, clients know that we define success by their standards, not ours. That's why over 50% of the world’s largest real estate private equity investors rely on us to deliver their ground-breaking transactions.
No matter where a client or project is based, or the capital is being invested, BCLP offers a team of globally connected lawyers operating as one. Leveraging our relationship-driven, collaborative culture and diverse legal experience, we provide clear, connected legal advice wherever and whenever you need it.
To discuss your real estate legal needs, contact the BCLP Real Estate Team.
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